Worker Matching and Firm Value
نویسنده
چکیده
This paper studies the value of rms and their hiring and ring decisions in an environment where the productivity of the workers depends on how well they match with their co-workers and the rm acts as a coordinating device. Match quality derives from a production technology whereby workers are randomly located on the Salop circle, and depends negatively on the distance between the workers. It is shown that a workers contribution in a given rm changes over time in a nontrivial way as co-workers are replaced with new workers. The paper derives optimal hiring and replacement policies, including an optimal stopping rule, and characterizes the resulting equilibrium in terms of employment, wages and distribution of rm values. The paper stresses the role of horizontal di¤erences in worker productivity, as opposed to vertical, assortative matching issues. Simulations of the model show the dynamics of worker replacement policy, the resulting rm value and age distributions, and the connections between them. Key words: rm value, complementarity, worker value, Salop circle, hiring, ring, match quality, optimal stopping. JEL codes: E23, J62, J63. [email protected] [email protected]
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